UK unemployment rate unexpectedly fell in the three months to January

According to the report from Office for National Statistics, the latest three months to February 2021 recorded small increases in the number of payroll employees although since February 2020, the number of payroll employees has fallen by 693,000 with the largest falls seen at the start of the coronavirus (COVID-19) pandemic. Analysis by age band shows that under 25s contributed over 60% of the fall seen since February 2020.

Data from our Labour Force Survey (LFS) show the unemployment rate continued to increase, though the increase is smaller than in recent periods, while the employment rate continued to fall. There was an increase for people who are economically inactive, largely driven by people who are inactive because they are students.

The Office for National Statistics said that 693,000 fewer people were in payrolled employment in February 2021, when compared with February 2020. 68,000 more people were in payrolled employment in February 2021, when compared with January 2021; this is the third consecutive monthly increase.

The UK employment rate, in the three months to January 2021, was estimated at 75.0%, 1.5 percentage points lower than a year earlier and 0.3 percentage points lower than the previous quarter.

The UK unemployment rate, in the three months to January 2021, was estimated at 5.0%, 1.1 percentage points higher than a year earlier and 0.1 percentage points higher than the previous quarter.

The UK economic inactivity rate was estimated at 21.0%, 0.6 percentage points higher than a year earlier and 0.3 percentage points higher than the previous quarter.

Growth in average total pay (including bonuses) among employees for the three months November 2020 to January 2021 increased to 4.8%, and growth in regular pay (excluding bonuses) increased to 4.2%; it is estimated that by removing the compositional effect, the underlying wage growth is around 3% for total pay and around 2.5% for regular pay.